Everyones biggest competitor: Amazon

Retailers have at least one thing in common: Amazon as a competitor. According to Bloomberg, The retail giant surpassed Walmart as the largest retailer based on market value in mid-2015 and isn’t showing any signs of slowing down. From unveiling new private label apparel lines to dominating mobile, Amazon continues to innovate in the retail space.

Pioneering new territories
When thinking Amazon, the “dot com” naturally follows; Amazon’s dominance of the e-commerce landscape is uncontested. According to Women’s Wear Daily, Amazon tops the list of the top 25 e-commerce retailers, netting over $79.3 billion in online sales in 2015, making e-commerce shares 74.1 percent of Amazon’s total sales.

Amazon has a history of successfully navigating the e-commerce market and recently made the decision to exit the dying flash sale market with the close of MyHabit. In an already congested space including the likes of Hautelook, RueLaLa and Guilt, the closing of MyHabit paved the way to the opening of Amazon’s own private apparel label brands, including Franklin & Freeman, Lark & Ro, Society New York and four others. Collectively, these brands have over 1,800 pieces available for sale ranging from men’s dress shoes to contemporary clothing for women and each brand has its own style identity and price point. With the decline of foot traffic in malls and large department stores, only time will tell if Amazon will become the go-to source for clothing as well.

Amazon was able to turn lemons into lemonade through the closure of MyHabit and the launch of private label apparel brands. Retailers should take note of this approach and look for opportunities to turn a less than ideal situation around by innovating into new areas.

Dominating mobile and social

Amazon continues to lead mobile integration as well. With most of Amazon’s business conducted online, its various mobile platforms must be seamless. Illustrating this point, during the 2015 holiday season nearly 70 percent of Amazon’s customers shopped via a mobile device. From tablet to smart phone to laptop, users enjoy a truly omnichannel experience complete with the option of one-click purchasing.

In some cases, Amazon has taken its one-click purchasing from site to social via collaborations with various social media influencers and even sourcing user-generated content. This is exemplified in the newly launched online show, “Style Code Live,” which features fashion and beauty tips from style experts and encourages viewers to interact via a live chat interface. The show will feature big social media names such as YouTube star Tati Westbrook. Another initiative involves the Amazon #PrimePet hashtag, which features pets in Amazon boxes or “browsing” Amazon.com, and in turn, Amazon shares via its verified Instagram handle.

The strategy of partnering with social media personalities can be lucrative. According to a survey conducted by Twitter, 40 percent of respondents said they would purchase an item online after seeing it worn or used by one of their favorite social celebrities, and 49 percent said they rely on recommendations for influencers for their purchasing decisions.

From bolstering mobile channels to strategic partnerships with social influencers, retailers should evaluate their own social program and consider which winning strategies they may be overlooking.

Leading subscription-based services

According to a report from Consumer Intelligence Research Partners, nearly half of all U.S. households have an Amazon Prime membership, and other retailers are adding competition to the mix. Earlier this month, Walmart unveiled that it is testing a two-day shipping subscription service, not unlike Prime, and Sephora already offers a FLASH shipping program to customers.

The main difference between such shipping programs and Amazon Prime is the sheer volume of Amazon’s goods and services that others cannot provide, and may not be able to do so in the future. Previously, Walmart and other grocery retailers had the advantage of offering fresh produce when Amazon could not. However, with the expansion of “AmazonFresh,” a service that quickly delivers fresh goods and perishables (like Prime), Amazon will likely become a larger player in that space as well.

While not all businesses have the capacity to start a subscription-based service, there is still the possibility of finding a niche in the retail industry. Just as Amazon Prime fulfilled the need for quick results, retailers should evaluate which white spaces their business can fill while operating in their existing business model.

Future innovations

In February, Amazon’s CEO Jeff Bezos confirmed that the company is testing drones in Canada, the UK and the Netherlands, in addition to awaiting regulatory approval in the U.S. for its Prime Air Delivery service, in hopes of transporting goods from point A to point B in less time than ever. Soon, consumers will be able to get just about anything delivered right to their doorstep. The big question is, what frontier will Amazon explore next?

about the author

Natalie leads BDO’s consumer business practice and serves as an advisor to retail and consumer products companies throughout the United States. She has more than 20 years of experience providing private and SEC-reporting companies with financial statement auditing and business advisory consulting services. She also frequently works on retail-related mergers and acquisitions. Natalie is based in BDO’s New York office. read full bio